Morgan v. United States 29 8212 30, 1936

Decision Date25 May 1936
Docket NumberNo. 686,686
PartiesMORGAN et al. v. UNITED STATES et al. Argued April 29—30, 1936
CourtU.S. Supreme Court

Appeal from the District Court of the United States for the Western District of Missouri.

Messrs. Frederick H. Wood, of New York City, and John B. Gage, of Kansas City, Mo., for appellants.

Mr. John Dickinson, Asst. Atty. Gen., for appellees.

[Argument of Counsel from pages 469-470 intentionally omitted] Mr. Chief Justice HUGHES delivered the opinion of the Court.

These are fifty suits, consolidated for the purpose of trial, to restrain the enforcement of an order of the Secretary of Agriculture, fixing the maximum rates to be charged by market agencies for buying and selling livestock at the Kansas City Stock Yards. Packers and Stockyards Act 1921, 42 Stat. 159, 7 U.S.C. §§ 181—229, 7 U.S.C.A. § 181 et seq.

The proceeding was instituted by an order of the Secretary of Agriculture in April, 1930, directing an inquiry into the reasonableness of existing rates. Testimony was taken and an order prescribing rates followed in May, 1932. An application for rehearing, in view of changed economic conditions, was granted in July, 1932. After the taking of voluminous testimony, which was concluded in November, 1932, the order in question was made on June 14, 1933. Rehearing was refused on July 6, 1933.

Plaintiffs then brought these suits attacking the order, so far as it prescribed maximum charges for selling livestock, as illegal and arbitrary and as depriving plaintiffs of their property without due process of law in violation of the Fifth Amendment of the Constitution. The District Court of three judges entered decrees sustaining the order and dismissing the bills of complaint. 8 F.Supp. 766. Motions for rehearing were denied, and, by stipulation, the separate decrees were set aside and a joint and final decree was entered to the same effect. Plaintiffs bring this direct appeal. 7 U.S.C. § 217, 7 U.S.C.A. § 217; 28 U.S.C. § 47, 28 U.S.C.A. § 47.

On the merits, plaintiffs assert that the ultimate basis for the reduction in commission rates is the Secretary's opinion that there are too many market agencies, too many salesmen, and too much competition in the business; that the Secretary has departed entirely from the evidence as to the actual cost of employing salesmen in selling cattle at these yards and has made an allowance for salaries which is based on pure speculation and is wholly inadequate to meet the cost of the service; that he has substituted in place of his accountants' figures as to actual expenditures, with respect to the item entitled 'Business Getting and Maintaining Expense,' a hypothetical allowance greatly less than actual cost; and that the Secretary has thus made findings without evidence and an order, essentially arbitrary, which prescribes unreasonable rates. The Government answers that, while the Secretary is not authorized expressly to prescribe or limit the number of firms that may engage in the market agency business, he is under a duty to take cognizance of evidence tending to show that, under present competitive conditions, certain costs actually incurred are unreasonable; that, in determining what are just and reasonable rates, he must give consideration to evidence of the excessiveness of costs, and, if such evidence shows that there are many market agencies not receiving a sufficient volume of business to entitle their costs to be regarded as reasonable, the Secretary must take cognizance of that fact; that it was in this view that the Secretary made certain findings as to the inadequacy of the present business at the stockyards to support economically all the firms now striving to make a profit; that his findings, supported by evidence, were directly pertinent to the determination of reasonable costs, and, so determining, the Secretary was authorized to fix the rates prescribed in his order.

Before reaching these questions, we meet at the threshold of the controversy plaintiffs' additional contention that they have not been accorded the hearing which the statute requires. They rightly assert that the granting of that hearing is a prerequisite to the making of a valid order. The statute provides (42 Stat. 159, 166, § 310; 7 U.S.C. § 211, 7 U.S.C.A. § 211):

'Sec. 310. Whenever after full hearing upon a complaint made as provided in section 309 (section 210 of this chapter), or after full hearing under an order for investigation and hearing made by the Secretary on his own initiative, either in extension of any pending complaint or without any complaint whatever, the Secretary is of the opinion that any rate, charge, regulation, or practice of a stockyard owner or market agency, for or in connection with the furnishing of stockyard services, is or will be unjust, unreasonable, or discriminatory, the Secretary— '(a) May determine and prescribe what will be the just and reasonable rate or charge, or rates or charges, to be thereafter observed in such case, or the maximum or minimum, or maximum and minimum, to be charged, and what regulation or practice is or will be just, reasonable, and non-discriminatory to be thereafter followed.'

The allegations as to the failure to give a proper hearing are set forth in paragraph IV of the bill of complaint, quoted in full in the margin.1 The allegations in substance are: That separate hearings were not accorded to the respective respondents (plaintiffs here). That, at he conclusion of the taking of the testimony before an examiner, a request was made that the examiner prepare a tentative report, which should be subject to oral argument and exceptions, so that a hearing might be had before the Secretary without undue inconvenience to him, but that the request was denied, and no tentative report was exhibited to plaintiffs and no oral argument upon the issues presented by the order of inquiry and the evidence was at any time had before the Secretary. That the Secretary, without warrant of law, delegated to Acting Secretaries the determination of issues with respect to the reasonableness of the rates involved. That, when the oral arguments were presented after the original hearing, and after the rehearing, the Secretary was neither sick, absent, nor otherwise disabled, but was at his office in the Department of Agriculture, and the appointment of any other person as Acting Secretary was illegal. That the Secretary at the time he signed the order in question had not personally heard or read any of the evidence presented at any hearing in connection with the proceeding, and had not heard or considered oral arguments relating thereto or briefs submitted on behalf of the plaintiffs, but that the sole information of the Secretary with respect to the proceeding was derived from consultation with employees in the Department of Agriculture out of the presence of the plaintiffs or any of their representatives.

On motion of the government, the District Court struck out all the allegations in paragraph IV of the bill of complaint, and the plaintiffs were thus denied opportunity to require an answer to these allegations or to prove the facts alleged.

Certain facts appear of record. The testimony was taken before an examiner. At its conclusion, counsel for respondents stated 'that he would continue to demand that the Secretary hear personally the argument of the evidence in behalf of the individual respondents, or at least have some definte course of procedure adopted whereby the examiner, or some one else, should formulate a report on the evidence so that the respondents could have the character of hearing and right to present their side of the issues in this case, which they believe the law entitles them to.' The government does not suggest that this request was granted, and plaintiffs say that it was denied. Oral argument upon the evidence was had before the Acting Secretary of Agriculture. Subsequently, brief was filed on plaintiffs' be- half. Thereafter, reciting 'careful consideration of the entire record in this proceeding,' findings of fact and conclusions, and an order prescribing rates, were signed by the Secretary of Agriculture.

First. The Packers and Stockyards Act makes the provisions of all laws relating to the 'suspending or restraining the enforcement' or the 'setting aside' of the orders of the Interstate Commerce Commission applicable to the 'jurisdiction, powers, and duties of the Secretary' in enforcing the provisions of the act. Section 316; 7 U.S.C. § 217, 7 U.S.C.A. § 217. These suits for the review of the administrative action were thus directly authorized, and appeal lies under the Urgent Deficiencies Act of October 22, 1913. 38 Stat. 219, 220; 28 U.S.C. § 47, 28 U.S.C.A. § 47. Tagg Bros. & Moorhead v. United States, 280 U.S. 420, 443, 50 S.Ct. 220, 74 L.Ed. 524; Acker v. United States, 298 U.S. 426, 56 S.Ct. 824, 80 L.Ed. —-, decided May 18, 1936. All questions touching the regularity and validity of the proceeding before the Secretary are open to review. United States v. Abilene & Southern Railway Co., 265 U.S. 274, 286—290, 44 S.Ct. 565, 68 L.Ed. 1016; Florida v. United States, 282 U.S. 194, 212—215, 51 S.Ct. 119, 75 L.Ed. 291. When the Secretary acts within the authority conferred by the statute, his findings of fact are conclusive. Tagg Bros. & Moorhead v. United States, supra; St. Joseph Stock Yards Co. v. United States, 298 U.S. 38, 56 S.Ct. 720, 80 L.Ed. —-, decided April 27, 1936; Acker v. United States, supra. But, in determining whether in conducting an administrative proceeding of this sort the Secretary has complied with the statutory prerequisites, the recitals of his procedure cannot be regarded as conclusive. Otherwise the statutory conditions could be set at naught by mere assertion. If upon the facts alleged the 'full hearing' required by the statute was not given, plaintiffs were entitled to prove the facts and have the Secretary's order set aside. Nor is it necessary...

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